A DEFICIT.

Auckland Star, Volume LVXIII, Issue 53, 4 March 1937, Page 9

A DEFICIT.

DAIRY ACCOUNT.

TREND OF PRICES.

BELOW THE GUARANTEE.

ESTIMATES FOR THE SEASON.

Public interest in guaranteed prices las lately changed from speculation ae to the possibility of a surplus in the Dairy Industry Account to an inquiry as to the probable size of the deficit. With seven months of the period past and only five to go, it appears that a deficit is certain. The main facts of the situation are: — Deficiency in the Pairr Industry Account at the "Reserve Bank. £6..t69,2.-iO. Present price of butter in London, 88/ to SO/ per cwt. Highest price recorded since guaranteed! price scheme came into operation on 1 August. 1, 1936, 121/ per cwt on August 18. J»weet price. 83/ on February 20. 1937. Guaranteed price of 12 !>l6d per lb of butter equivalent to 106}/ per cwt in London. Fluctuations in Jftrket. The market became weak during j December, and the London price, which J fell below 100/ per cwt almost on the eve of Christmas, has not since risen higher than &0/. February, representing the peak selling period, was a month of exceptionally low prices. Earlier in the .season the outiook for the Government's srheme was reasonably bright, and in August and September thpre was a moderate surplu?. Again in November. after a temporary fall in October, the London realisations were sufficiently b\sh to cover the guarantee. These, however, were not months of heavy celling, and the surplus in hand quickly disappeared when the full weight of a prolific New Zealand season came to fc r * r -M^Ah _ <

As to the prospects of the next few I months, opinions differ. Some improvement is expected, but it is considered unlikely that this will go very far. Ofj course.there will bp ;in increase in rou-j sumption in Britain due to the enormous, spending on armaments, and the uiarkct i will be further stimulated as a reMilt of the influx of visitors for the ( oionat ion. but the result of these variable iiiflu ences is not easy to estimate. Enormous Armaments Spending. Questioned to-day, an Auckland representative of the industry said he regarded the effect of the armaments programme as of much greater importance in the coming months than the Coronation demand, and, in the long run it would be a dominating influence. "Can you give an estimate of the average price of butter and cheese for the first twelve months of the guarantee?" he was asked. "I would put the average between 9.V and 100/ for butter and between 52/ and 55/ for cheese," was his reply. "And production, is * that likely to exceed last year's total?" was a further question. "Yes, production is up. but not. to any crreat extent."' he said. ''Last season New Zealand produced 169,840 tons of ■butter, of which 142.840 tons were graded for export. That left 27,000 Tons for local consumption or carried forward to the current export season. Cheese production was 80.4.">0 tons, of which 54.444 tons were graded for export and 5000 tons were retained for local consumption or carried forward. At this stage in the season it is possible to form fairlv accurate estimates of the probable return to producers, as production has been steady and well-maintained." Cheque of £22,404,500. It was suggested that an estimate of the probable returns to producers would, therefore, be easier to arrive at this season than in previous years, the uncertainty in the figures being reduced to output alone. To this the reply was that the fixed price now being paid eliminated the most troublesome factor in the estimates. The informant then stated that the export of butter would probably rearh 145.000 tons and of cheese 85.000 tons. At the price guaranteed. 117/3 I per cwt for butter, the total would be *anij*for.

rheese. at 63/7 per cwt, £5,404,500. That. is. a total cheque for dairy farmers of C 22.40-1..100.

On the same quantities, an estimate of the amount received from sales in London, is as follows: Butter, at o."i/ per cwt. £13,870,000; or at 100/. £14..100.000. Cheese, at 52/, £4,420,000; or at -V./. £4.675,000.

Adding on the exchange premium, the total estimated receipts from dairy produce for the season are: At the lower average values taken for butter and rl.eese, £21,730,140, and at the higher 1 values, £22,700,000. Freight and Other Charges. These are estimates for the production season, which does not coincide exactly with the twelve months covered by the guarantee, but the difference which would result from including .Tuly, 1937. instead of July, 1036, would De small Therefore, in considering the future of the Dairy Industry Account the figures arrived at provide a fairly reliable basis. An addition of freight, handling and insurance charges requires to be made to the other payments from the account, bringing the total estimated payments for all purposes to £25.220,800.

The final result is reached by striking a balance between estimatH receipt" and estimated payments, which shows an estimated deficiency in the Dairy Account at the end of 'the first year of between £2,520,800 and £3,490*700.